Prov­inces push for struc­tural re­forms

China Daily European Weekly - - Business - By XINHUA

Sup­ply-side struc­tural re­form will con­tinue to be a pri­or­ity of pro­vin­cial gov­ern­ments this year as China re­solves to press ahead with the ma­jor tasks of re­form amid down­ward eco­nomic pres­sure, say pro­vin­cial gov­er­nors and busi­ness­men.

New tar­gets in cut­ting ex­cess ca­pac­ity in ma­jor sec­tors such as steel and coal have been set this year, as un­veiled at the an­nual ses­sions of pro­vin­cial leg­is­la­tures in Jan­uary, they add.

The lo­cal ses­sions, which re­view and ap­prove gov­ern­ment eco­nomic and so­cial de­vel­op­ment blue­prints, come ahead of the an­nual ses­sions of the na­tional leg­is­la­ture and the top po­lit­i­cal ad­vi­sory body in March.

Af­ter a re­duc­tion of 33 mil­lion tons in steel ca­pac­ity last year, China’s north­ern He­bei prov­ince aims to fur­ther slash about 32 mil­lion tons in the cur­rent year, ac­cord­ing to the pro­vin­cial gov­ern­ment work re­port ear­lier this month.

“2017 will be our tough­est year in ca­pac­ity re­duc­tion,” says Gov­er­nor Zhang Qing­wei.

“No mat­ter how dif­fi­cult it is, we are de­ter­mined to suc­ceed,” Zhang adds. He­bei pro­duces a quar­ter of the coun­try’s iron and steel.

Yu Yong, chair­man of Hes­teel Group, the big­gest steel com­pany in He­bei, says prop­erly cut­ting ca­pac­ity will make room for re­struc­tur­ing and up­grad­ing of the steel sec­tor.

The com­pany cut 3.2 mil­lion tons of iron and steel ca­pac­ity last year and is tar­get­ing a re­duc­tion of 4.4 mil­lion tons in 2017, Yu adds.

Coal-rich Shanxi and cen­tral He­nan both set the tar­gets of cut­ting 20 mil­lion tons of coal ca­pac­ity this year. The two prov­inces each slashed 23 mil­lion last year.

“Coal over­ca­pac­ity re­duc­tion should be achieved through mar­ket means,” says Lou Yangsheng, gov­er­nor of Shanxi, adding that merg­ers and re­or­ga­ni­za­tions will be en­cour­aged.

Hubei says that it will close all its coal pro­duc­tion firms in two years. South­west­ern Guizhou prov­ince will slash 15 mil­lion tons of coal ca­pac­ity by clos­ing 120 coal mines this year.

As part of the re­form, lo­cal gov­ern­ments will also fo­cus on han­dling poor-per­form­ing zom­bie com­pa­nies.

Eastern Zhe­jiang prov­ince plans to close 300 zom­bie com­pa­nies and 1,000 firms with out­dated ca­pac­ity this year. South­ern Guang­dong prov­ince aims to close 74 pri­vate zom­bie firms af­ter it closed more than 2,000 state-owned zom­bie com­pa­nies and 39 pri­vate com­pa­nies in 2016.

China achieved its 2016 target of cut­ting 45 mil­lion tons of steel and 250 mil­lion tons of coal pro­duc­tion ca­pac­ity, af­fect­ing nearly 800,000 work­ers.

This year, the tasks will be heav­ier, and zom­bie com­pa­nies will be fo­cused on, ac­cord­ing to Xu Shaoshi, head of the Na­tional De­vel­op­ment and Re­form Com­mis­sion, the coun­try’s top eco­nomic plan­ner.

So far, 27 prov­inces have un­veiled growth rates for last year and their tar­gets for 2017 at lo­cal an­nual leg­isla­tive ses­sions.

Among them, 23 had growth rates higher than the na­tional 6.7 per­cent, with Guizhou, Chongqing and Ti­bet all above 10 per­cent. Bei­jing and Shang­hai both re­ported 6.7 per­cent.

Most of the prov­inces aim to main­tain the same or slightly lower growth than in 2016.

With an es­ti­mated growth of 4.5 per­cent in 2016, lower than most other prov­inces, Shanxi set its GDP growth target at 5.5 per­cent this year to leave flex­i­bil­ity for trans­for­ma­tion and re­form.

Other re­forms, such as mar­ke­to­ri­ented debt-for-eq­uity swaps and ad­min­is­tra­tive stream­lin­ing, are be­ing em­pha­sized by many prov­inces to re­duce cor­po­rate lever­age and en­cour­age busi­nesses.

Be­sides struc­tural re­form in in­dus­try, of­fi­cials says China will also em­pha­size re­form in agri­cul­ture this year.

“Coal over­ca­pac­ity re­duc­tion should be achieved through mar­ket means.” LOU YANGSHENG Gov­er­nor of Shanxi prov­ince


AN EM­PLOYEE works with steel at a mill of CITIC Heavy In­dus­tries in Luoyang, He­nan prov­ince.

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